Nuclear Waste:

Weak DOE Contract Management Invited TRUPACT-II Setbacks

RCED-92-26: Published: Jan 14, 1992. Publicly Released: Feb 18, 1992.

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Pursuant to a congressional request, GAO reviewed the Department of Energy's (DOE) procurement of nuclear waste shipping containers for its Waste Isolation Pilot Plant (WIPP) in New Mexico, focusing on: (1) container defects; (2) why DOE purchased the containers; (3) the effectiveness of the DOE contracting strategy; and (4) subcontract oversight.

GAO found that: (1) in the process of building 24 shipping containers for WIPP, the DOE subcontractor ground the walls of the containers too thin in spots; (2) the Nuclear Regulatory Commission (NRC) would not permit DOE to ship transuranic waste in those containers; (3) to meet the WIPP schedule, the DOE prime contractor, with DOE encouragement, negotiated a settlement with the subcontractor to fabricate and deliver 15 NRC-approved containers and to transfer ownership of production assets, the defective containers, and 17 completed trailers to the government; (4) the prime contractor inappropriately used a firm-fixed-price subcontract in procuring the containers, since the subcontract's significant research and development aspects precluded an accurate cost estimate; (5) the subcontract caused the government to assume greater financial risk because contract options for the purchase of additional containers at specified prices were tied to calendar dates, rather than NRC certification of container design or acceptance of a completely fabricated container; (6) ambiguous subcontract terms regarding the ownership of certain production assets weakened the government's position in the event of unsatisfactory subcontractor performance; (7) subcontract oversight was ineffective, since the prime contractor continued to make payments to the subcontractor even after NRC rejected its containers, and DOE approved the firm-fixed-price subcontract and had little involvement with container fabrication matters until NRC rejected the containers; (8) the DOE hands-off relationship with its nuclear facilities contractors has caused it to exercise insufficient oversight over its contractors and subcontractors; and (9) although DOE is making changes to improve its contract management approach, instituting effective, lasting changes will be difficult.

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